Macro 1-2 Flashcards
(18 cards)
What is the difference between micro and macro economics?
Microeconomics - single industries or markets.
Macroeconomics - many industries and markets or national economies.
How are micro and macro economics similar?
Both use scientific approach - observing the world to form models that can be used to predict future events, and then testing those models.
Both interested in behaviour and distribution of resources.
State the acronym for the main macroeconomic indicators, and then state what each letter stands for.
Trade balance Inflation Growth (GDP) Employment (or Unemployment) Redistribution of Wealth
Define economic growth.
Increase in the production of finished goods and services.
Why does an increase in Nominal GDP not necessarily mean economic growth?
An increase in Nominal GDP can be due to inflation.
How is GDP calculated?
Summing the market value of all finished goods and services (finished, so if flour sold for a cake that is then sold, flour not counted) made in one country in one year.
Define finished goods.
Goods that will never be resold.
Why are capital goods counted in GDP?
Although they are used to make other goods and services, they are not resold.
Why are goods and services produced in another country or that can’t have a value attributed to them not counted in GDP?
They’re made in another country or don’t have a market value so can’t have a value added to the total.
What is the difference between nominal and real GDP?
Nominal doesn’t adjust for inflation whereas real GDP does.
How does real GDP adjust for inflation?
It uses a base year and then adjusts prices in future years so they are at the same level as the base year.
What is GDP per capita?
GDP/Population.
What are the 3 main aims of government regarding economic growth?
2% inflation, low unemployment, stable growth.
What is GNI?
The total income that goes to a country from its residents or businesses whether they’re located in the country or not.
What is GNP?
The total income that goes to the residents or businesses of a country whether they’re located in the country or not. This is GNI but whether the income goes to the country or is spent elsewhere doesn’t matter.
What are the difficulties in measuring economic growth?
Lack of data on national income and national consumption.
Why do economists disagree on how to measure economic growth?
Some think it should be done on per capita income and some on national income, and some think living standards should be used.
Why might focusing on economic growth not be the best thing?
It doesn’t consider unemployment, wealth inequality or living conditions.
